Slower global economic growth, China’s fight against COVID, and the Russian invasion of Ukraine prompted OPEC to slash for a second month running its global oil demand growth estimate for 2022.
In its Monthly Oil Market Report (MOMR) out on Thursday, OPEC revised down—again—its forecast for global economic growth and said oil demand would grow by 310,000 barrels per day (bpd) less than the growth anticipated in the April report.
Back in April, OPEC slashed its oil demand growth estimate for 2022 by 480,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China.
In this month’s report, the cartel cut its world economic growth estimate to 3.5% from 3.9%, having revised down in April its global growth forecast to 3.9% from 4.2%.
Commenting on the global economy, OPEC said that “The upside potential to the current forecast is quite limited. However, it may come from a solution to the Russia and Ukraine situation, fiscal stimulus, where possible, and a fading pandemic, in combination with a strong rise in service sector activity.”
For global oil demand, OPEC now sees growth of 3.36 million bpd in 2022 compared to 2021, down by 310,000 bpd from last month’s estimate. Yet, overall, global oil demand is still set to average above 100 million bpd this year, at 100.29 million bpd, per OPEC’s latest forecast. The second-quarter demand estimate was revised down by a massive 670,000 bpd to 98.44 million bpd, but average global oil demand is set to exceed the 100 million bpd mark in the third and fourth quarters, with Q4 demand seen at 102.64 million bpd.
“Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions,” OPEC said.
“Uncertainties to the forecast remain large, especially given recent geopolitical developments in Eastern Europe. Moreover, high inflation levels, coupled with labour shortages and tighter monetary policies by major central banks may also impact the cost of oil production and investment levels in the upstream beyond the short term,” the cartel noted.
Also on Thursday, the International Energy Agency (IEA) published its monthly report, in which it left its demand forecasts unchanged from last month, expecting 2022 oil demand to rise by 1.8 million bpd on average to 99.4 million bpd.
Despite the loss of supply from Russia, “steadily rising output elsewhere, coupled with slower demand growth, especially in China, is expected to fend off an acute supply deficit in the near term,” the IEA said in its report.
